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Welcome to the sharing economy

If you are reading this, the chances are you are part of the sharing economy. This is a concept that many of us have heard talked about, and it has even been the subject of a recent government review.

In the first article in our sharing economy series, this post will look at what exactly is the sharing economy? Why did it start, and why do many people think it is the next big thing when it comes to the internet and commerce?

Who’s in?

There are no hard and fast rules about who is part of the sharing economy and who isn’t: there is no annual subscription or membership card.

But most observers agree that it involves individuals renting out or lending their resources or goods to other people,with the help of an internet-based matchmaking service.

These resources could be cash (in the case of Zopa), spare rooms and property (Airbnb, Lovehomeswap), cars (BlaBlaCar, Lyft), parking spaces (JustPark) or the ability to fix a leaking toilet (TaskRabbit), to name just a few.

Profit from downtime

The philosophy underpinning these services is that most of us own things that spend a lot of time unused. What the sharing economy allows us to do is make extra cash by letting others use these items when it suits us.

From a borrower’s perspective, there is no longer the need to do business with, say, a high-street bank, a global car-rental firm or an international hotel chain, with all the overheads and extra expense that those options can often entail. The financial advantages of sharing are undoubtedly the key to its success, but there are other benefits too.

Using a smartphone app to book a taxi ride or find a parking spot can be much more quick and convenient than traditional methods.

The sheer variety of accommodation options on a site like Airbnb is a big selling point – as is the fact that you can choose to stay with or meet owners who can help show you around a new city or area.

And for those of us worried about consumption levels, sharing goods like cars, bikes and power tools helps us make more efficient use of the world’s scarce resources.

Technology and the financial crisis

Perhaps the two biggest drivers behind the growth of sharing have been the technology that makes this global matchmaking possible, and the economic problems that followed the financial crisis.

None of the major economies have fully recovered from the effects of the credit crunch and consumers are still under great pressure both to make the most of what they have, as well as to cut their expenditure levels wherever possible.

Zopa launched long before the financial crisis started, but the fallout from the downturn – tight restrictions on credit, low interest rates and a general distrust of the banks – has turned our proposition into a no-brainer for many potential borrowers and lenders. Crowdfunding platforms have benefited in a similar way.

But although tough financial conditions were an important stimulus for the sharing economy, it is more or less unthinkable that a return to prosperity would see consumers giving up the gains that sharing has brought.

The genie is out of the bottle now and there is no going back. In the next article in this sharing economy series we’ll look at the recent government report and what it recommends for consumers and companies.